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The rupee (INR) closed flat against the dollar (USD) yesterday, though it faced considerable selling pressure in the first half of the session. Thus, it ended the session above the key support of 71 and since the trend is in favour of the local currency, it is less likely to depreciate below that level.
Notably, the exchange rate of the USDINR currency pair has been trading within the 70.5-72.25 range since September last year. Thus, if the rupee advances, taking support at 71, it can rally to 70.5. There is minor resistance at 70.75. On the other hand, if the rupee weakens below 71, the immediate support is at 71.2.
Dollar index
The dollar index has been in a sideways trend for the past few trading sessions. The index has been unable to crack resistance at 97.5, where the 50-day moving average coincides. Currently trading at 97.35, a decline will drag the index to 97.2 (21-day moving average) and 97. Observing the price action, the index can be expected to oscillate between 97 and 97.5 for quite some time.
Trade strategy
The rupee opened lower today at 70.97, against its previous close of 70.87. Though it is trading above the support of 71, the domestic currency seems to be facing selling pressure. Thus, it is recommended to stay on the sidelines until a definite trend emerges. However, traders with higher risk appetite can go long in rupee on the back of support at 71 and place a tight stop-loss.
Supports: 71 and 71.2
Resistances: 70.75 and 70.5
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